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Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010

Type Regulation
Publication 2014-07-30
Last updated 2026-06-11
State In force
Department Council of the European Union, European Parliament
Source EUR-Lex
articles 115
Reform history JSON API
  • (b) the total exposure measure of the relevant entity referred to in paragraph 1 of this Article, calculated in accordance with Articles 429 and 429a of Regulation (EU) No 575/2013.
3.

In accordance with Article 65 of Regulation (EU) 2019/2033 of the European Parliament and of the Council ([^E0005]), references to Article 92 of Regulation (EU) No 575/2013 in this Regulation as regards the own funds requirements on an individual basis of investment firms referred to in point (c) of Article 2 of this Regulation and which are not investment firms referred to in Article 1(2) or 1(5) of Regulation (EU) 2019/2033 shall be construed as follows:

  • (a) references to point (c) of Article 92(1) of Regulation (EU) No 575/2013 as regards the total capital ratio requirement in this Regulation shall refer to Article 11(1) of Regulation (EU) 2019/2033;
  • (b) references to Article 92(3) of Regulation (EU) No 575/2013 as regards the total risk exposure amount in this Regulation shall refer to the applicable requirement in Article 11(1) of Regulation (EU) 2019/2033, multiplied by 12,5.

In accordance with Article 65 of Directive (EU) 2019/2034 of the European Parliament and of the Council ([^E0006]), references to Article 104a of Directive 2013/36/EU in this Regulation as regards additional own funds requirements of investment firms referred to in point (c) of Article 2 of this Regulation and which are not investment firms referred to in Article 1(2) or 1(5) of Regulation (EU) 2019/2033 shall be construed as referring to Article 40 of Directive (EU) 2019/2034.

Article 12b
Exemption from the minimum requirement for own funds and eligible liabilities
1.

Notwithstanding Article 12a, the Board shall exempt from the requirement laid down in Article 12a(1) mortgage credit institutions financed by covered bonds which are not allowed to receive deposits under national law, provided that all of the following conditions are met:

  • (a) those institutions will be wound up in national insolvency proceeding or in other types of proceedings laid down for those institutions and implemented in accordance with Article 38, 40 or 42 of Directive 2014/59/EU; and
  • (b) the proceedings referred to in point (a) ensure that creditors of those institutions, including holders of covered bonds, where relevant, bear losses in a way that meets the resolution objectives.
2.

Institutions exempted from the requirement laid down in Article 12(1) shall not be part of the consolidation referred to in Article 12f(1).

Article 12c
Eligible liabilities for resolution entities
1.

Liabilities shall be included in the amount of own funds and eligible liabilities of resolution entities only where they satisfy the conditions referred to in the following Articles of Regulation (EU) No 575/2013:

  • (a) Article 72a;
  • (b) Article 72b, with the exception of point (d) of paragraph 2; and
  • (c) Article 72c.

By way of derogation from the first subparagraph of this paragraph, where this Regulation refers to the requirements in Article 92a or Article 92b of Regulation (EU) No 575/2013, for the purpose of those Articles, eligible liabilities shall consist of eligible liabilities as defined in Article 72k of that Regulation and determined in accordance with Chapter 5a of Title I of Part Two of that Regulation.

2.

Liabilities that arise from debt instruments with embedded derivatives, such as structured notes, that meet the conditions of the first subparagraph of paragraph 1, except for point (l) of Article 72a(2) of Regulation (EU) No 575/2013, shall be included in the amount of own funds and eligible liabilities only where one of the following conditions is met:

  • (a) the principal amount of the liability arising from the debt instrument is known at the time of issue, is fixed or increasing, and is not affected by an embedded derivative feature, and the total amount of the liability arising from the debt instrument, including the embedded derivative, can be valued on a daily basis by reference to an active and liquid two-way market for an equivalent instrument without credit risk, in accordance with Articles 104 and 105 of Regulation (EU) No 575/2013; or
  • (b) the debt instrument includes a contractual term that specifies that the value of the claim in cases of the insolvency of the issuer and of the resolution of the issuer is fixed or increasing, and does not exceed the initially paid-up amount of the liability.

Debt instruments referred to in the first subparagraph, including their embedded derivatives, shall not be subject to any netting agreement and the valuation of such instruments shall not be subject to Article 49(3) of Directive 2014/59/EU.

The liabilities referred to in the first subparagraph shall only be included in the amount of own funds and eligible liabilities with respect to the part of the liability that corresponds to the principal amount referred to in point (a) of that subparagraph or to the fixed or increasing amount referred to in point (b) of that subparagraph.

3.

Where liabilities are issued by a subsidiary established in the Union to an existing shareholder that is not part of the same resolution group, and that subsidiary is part of the same resolution group as the resolution entity, those liabilities shall be included in the amount of own funds and eligible liabilities of that resolution entity, provided that all of the following conditions are met:

  • (a) they are issued in accordance with point (a) of Article 12g(2);
  • (b) the exercise of the write-down or conversion power in relation to those liabilities in accordance with Article 21 does not affect the control of the subsidiary by the resolution entity;
  • (c) those liabilities do not exceed an amount determined by subtracting:
  • (i) the sum of the liabilities issued to and bought by the resolution entity either directly or indirectly through other entities in the same resolution group and the amount of own funds issued in accordance with point (b) of Article 12g(2) from
  • (ii) the amount required in accordance with Article 12g(1).
4.

Without prejudice to the minimum requirement in Article 12d(4) or point (a) of Article 12e(1), the Board, on its own initiative after consulting the national resolution authority or upon proposal by a national resolution authority, shall ensure that a part of the requirement referred to in Article 12f equal to 8 % of the total liabilities, including own funds, shall be met by resolution entities that are G-SIIs or resolution entities that are subject to Article 12d(4) or (5) using own funds, subordinated eligible instruments, or liabilities as referred to in paragraph 3 of this Article. The Board may permit that a level lower than 8 % of the total liabilities, including own funds, but greater than the amount resulting from the application of the formula (1-(X1/X2)) × 8 % of the total liabilities, including own funds, shall be met by resolution entities that are G-SIIs or resolution entities that are subject to Article 12d(4) or (5) using own funds, subordinated eligible instruments, or liabilities as referred in paragraph 3 of this Article, provided that all the conditions set out in Article 72b(3) of Regulation (EU) No 575/2013 are met, where, in light of the reduction that is possible under Article 72b (3) of that Regulation:

X1 = 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013; and

X2 = the sum of 18 % of the total risk exposure amount calculated in accordance with Article 92(3) of Regulation (EU) No 575/2013 and the amount of the combined buffer requirement.

For resolution entities that are subject to Article 12d(4), where the application of the first subparagraph of this paragraph leads to a requirement greater than 27 % of the total risk exposure amount, for the resolution entity concerned, the Board shall limit the part of the requirement referred to in Article 12f which is to be met using own funds, subordinated eligible instruments, or liabilities as referred to in paragraph 3 of this Article, to an amount equal to 27 % of the total risk exposure amount, if the Board has assessed that:

  • (a) access to the Fund is not considered to be an option for resolving that resolution entity in the resolution plan; and
  • (b) where point (a) does not apply, the requirement referred to in Article 12f allows that resolution entity to meet the requirement referred to in Article 27(7).

In carrying out the assessment referred to in the second subparagraph, the Board shall also take into account the risk of disproportionate impact on the business model of the resolution entity concerned.

For resolution entities that are subject to Article 12d(5), the second subparagraph of this paragraph does not apply.

5.

For resolution entities that are neither G-SIIs nor resolution entities that are subject to Article 12d(4) or (5), the Board, either on its own initiative after consulting the national resolution authority or on a proposal by a national resolution authority, may decide that a part of the requirement referred to in Article 12f up to the greater of 8 % of the total liabilities, including own funds, of the entity and the formula referred to in paragraph 7 of this Article, shall be met using own funds, subordinated eligible instruments, or liabilities as referred to in paragraph 3 of this Article, provided that the following conditions are met:

  • (a) non-subordinated liabilities referred to in paragraphs 1 and 2 of this Article have the same priority ranking in the national insolvency hierarchy as certain liabilities that are excluded from the application of write-down and conversion powers in accordance with Article 27(3) or Article 27(5);
  • (b) there is a risk that, as a result of a planned application of write-down and conversion powers to non-subordinated liabilities that are not excluded from the application of write-down and conversion powers in accordance with Article 27(3) or Article 27(5), creditors whose claims arise from those liabilities incur greater losses than they would incur in a winding up under normal insolvency proceedings;
  • (c) the amount of own funds and other subordinated liabilities does not exceed the amount necessary to ensure that the creditors referred to in point (b) do not incur losses above the level of losses that they would otherwise have incurred in the winding-up under normal insolvency proceedings.

Where the Board determines that, within a class of liabilities which includes eligible liabilities, the amount of the liabilities that are excluded or reasonably likely to be excluded from the application of write-down and conversion powers in accordance with Articles 27(3) or 27(5) totals more than 10 % of that class, the Board shall assess the risk referred to in point (b) of the first subparagraph of this paragraph.

6.

For the purposes of paragraphs 4, 5, and 7, derivative liabilities shall be included in total liabilities on the basis that full recognition is given to counterparty netting rights.

The own funds of a resolution entity that are used to comply with the combined buffer requirement shall be eligible to comply with the requirements referred to in paragraphs 4, 5 and 7.

7.

By derogation from paragraph 3 of this Article, the Board may decide that the requirement referred to in Article 12f of this Regulation shall be met by resolution entities that are G-SIIs or resolution entities that are subject to Article 12d(4) or (5) of this Regulation using own funds, subordinated eligible instruments, or liabilities as referred to in paragraph 3 of this Article, to the extent that, due to the obligation of the resolution entity to comply with the combined buffer requirement and the requirements referred to in Article 92a of Regulation (EU) No 575/2013, Article 12d(4) and Article 12f of this Regulation, the sum of those own funds, instruments and liabilities does not exceed the greater of:

  • (a) 8 % of total liabilities, including own funds, of the entity; or
  • (b) the amount resulting from the application of the formula A × 2 + B × 2 + C, where A, B and C are the following amounts: A = the amount resulting from the requirement referred to in point (c) of Article 92(1) of Regulation (EU) No 575/2013; B = the amount resulting from the requirement referred to in Article 104a of Directive 2013/36/EU; C = the amount resulting from the combined buffer requirement.
8.

The Board may exercise the power referred to in paragraph 7 of this Article with respect to resolution entities that are G-SIIs or that are subject to Article 12d(4) or (5), and that meet one of the conditions set out in the second subparagraph of this paragraph, up to a limit of 30 % of the total number of all resolution entities that are G-SIIs or that are subject to Article 12d(4) or (5) for which the Board determines the requirement referred to in Article 12f.

The conditions shall be considered by the Board as follows:

  • (a) substantive impediments to resolvability have been identified in the preceding resolvability assessment and either:
  • (i) no remedial action has been taken following the application of the measures referred to in Article 10(11) in the timeline required by the Board, or
  • (ii) the identified substantive impediments cannot be addressed using any of the measures referred to in Article 10(11), and the exercise of the power referred to in paragraph 7 of this Article would partially or fully compensate for the negative impact of the substantive impediments on resolvability;
  • (b) the Board considers that the feasibility and credibility of the resolution entity's preferred resolution strategy is limited, taking into account the entity's size, its interconnectedness, the nature, scope, risk and complexity of its activities, its legal status and its shareholding structure; or
  • (c) the requirement referred to in Article 104a of Directive 2013/36/EU reflects the fact that the resolution entity that is a G-SII or that is subject to Article 12d(4) or (5) of this Regulation is, in terms of riskiness, among the top 20 % of institutions for which the Board determines the requirement referred to in Article 12a(1) of this Regulation.

For the purposes of the percentages referred to in the first and second subparagraphs, the Board shall round the number resulting from the calculation up to the closest whole number.

9.

After consulting the competent authorities, including the ECB, the Board shall take the decisions referred to in paragraph 5 or 7.

When taking those decisions, the Board shall also take into account:

  • (a) the depth of the market for the resolution entity's own funds instruments and subordinated eligible instruments, the pricing of such instruments, where they exist, and the time needed to execute any transactions necessary for the purpose of complying with the decision;
  • (b) the amount of eligible liabilities instruments that meet all of the conditions referred to in Article 72a of Regulation (EU) No 575/2013 that have a residual maturity below one year as of the date of the decision, with a view to making quantitative adjustments to the requirements referred to in paragraphs 5 and 7 of this Article;
  • (c) the availability and the amount of instruments that meet all of the conditions referred to in Article 72a of Regulation (EU) No 575/2013 other than point (d) of Article 72b(2) of that Regulation;
  • (d) whether the amount of liabilities that are excluded from the application of write-down and conversion powers in accordance with Article 27(3) or (5) and that, in normal insolvency proceedings, rank equally with or below the highest ranking eligible liabilities is significant in comparison to the own funds and eligible liabilities of the resolution entity. Where the amount of excluded liabilities does not exceed 5 % of the amount of the own funds and eligible liabilities of the resolution entity, the excluded amount shall be considered as not being significant. Above that threshold, the significance of the excluded liabilities shall be assessed by the Board;
  • (e) the resolution entity's business model, funding model, and risk profile, as well as its stability and ability to contribute to the economy; and
  • (f) the impact of possible restructuring costs on the resolution entity's recapitalisation.
Article 12d
Determination of the minimum requirement for own funds and eligible liabilities
1.

The requirement referred to in Article 12a(1) shall be determined by the Board, after consulting the competent authorities, including the ECB, on the basis of the following criteria:

  • (a) the need to ensure that the resolution group can be resolved by the application of the resolution tools to the resolution entity, including, where appropriate, the bail-in tool, in a way that meets the resolution objectives;
  • (b) the need to ensure, where appropriate, that the resolution entity and its subsidiaries that are institutions or entities referred to in Article 12(1) and (3) but are not resolution entities have sufficient own funds and eligible liabilities to ensure that, if the bail-in tool or write-down and conversion powers, respectively, were to be applied to them, losses could be absorbed and the total capital ratio and, as applicable, the leverage ratio, of the relevant entities can be restored to a level necessary to enable them to continue to comply with the conditions for authorisation and to carry on the activities for which they are authorised under Directive 2013/36/EU or Directive 2014/65/EU;
  • (c) the need to ensure, if the resolution plan anticipates the possibility for certain classes of eligible liabilities to be excluded from bail-in pursuant to Article 27(5) of this Regulation or to be transferred in full to a recipient under a partial transfer, that the resolution entity has sufficient own funds and other eligible liabilities to absorb losses and to restore its total capital ratio and, as applicable, its leverage ratio, to the level necessary to enable it to continue to comply with the conditions for authorisation and to carry on the activities for which it is authorised under Directive 2013/36/EU or Directive 2014/65/EU;
  • (d) the size, the business model, the funding model and the risk profile of the entity;
  • (e) the extent to which the failure of the entity would have an adverse effect on financial stability, including through contagion to other institutions or entities, due to the interconnectedness of the entity with those other institutions or entities or with the rest of the financial system.
2.

Where the resolution plan provides that resolution action is to be taken or that the power to write down and convert relevant capital instruments and eligible liabilities in accordance with Article 21 is to be exercised in accordance with the relevant scenario referred to in Article 8(6), the requirement referred to in Article 12a(1) shall equal an amount sufficient to ensure that:

  • (a) the losses that are expected to be incurred by the entity are fully absorbed (‘loss absorption’);
  • (b) the resolution entity and its subsidiaries that are institutions or entities referred to in Article 12(1) or (3) but are not resolution entities are recapitalised to a level necessary to enable them to continue to comply with the conditions for authorisation, and to carry on the activities for which they are authorised under Directive 2013/36/EU, Directive 2014/65/EU or an equivalent legislative act for an appropriate period not longer than one year (‘recapitalisation’).

2a. The Board shall not determine the requirement referred to in Article 12a(1) for liquidation entities.

By way of derogation from the first subparagraph, the Board may assess whether it is justified to determine the requirement referred to in Article 12a(1) for a liquidation entity on an individual basis in an amount exceeding the amount sufficient to absorb losses in accordance with paragraph 2, point (a), of this Article. The Board shall take into account in its assessment, in particular, any possible impact on financial stability and on the risk of contagion to the financial system, including with regard to the financing capacity of deposit guarantee schemes. Where the Board determines the requirement referred to in Article 12a(1), the liquidation entity shall meet that requirement by using one or more of the following:

  • (a) own funds;
  • (b) liabilities that fulfil the eligibility criteria referred to in Article 72a of Regulation (EU) No 575/2013, with the exception of Article 72b(2), points (b) and (d), of that Regulation;
  • (c) the liabilities referred to in Article 12c(2).

Article 77 (2) and Article 78a of Regulation (EU) No 575/2013 shall not apply to liquidation entities for which the Board has not determined the requirement referred to in Article 12a(1) of this Regulation.

Holdings of own funds instruments and eligible liabilities instruments issued by subsidiary institutions which are liquidation entities for which the Board has not determined the requirement referred to in Article 12a(1) shall not be deducted under Article 72e(5) of Regulation (EU) No 575/2013.

By way of derogation from the fourth subparagraph, an institution or entity referred to in Article 2 that is not itself a resolution entity but is a subsidiary of a resolution entity or of a third-country entity that would be a resolution entity if it were established in the Union shall deduct its holdings of own funds instruments in subsidiary institutions that belong to the same resolution group and that are liquidation entities for which the Board has not determined the requirement referred to in Article 12a(1) where the aggregate amount of those holdings is equal to or exceeds 7 % of the total amount of its own funds and liabilities that comply with the eligibility criteria specified in Article 12g(2), calculated annually as of 31 December as an average over the previous 12 months.

3.

For resolution entities, the amount referred to in the first subparagraph of paragraph 2 shall be the following:

  • (a) for the purpose of calculating the requirement referred to in Article 12a(1), in accordance with point (a) of Article 12a(2), the sum of:
  • (i) the amount of the losses to be absorbed in resolution that corresponds to the requirements referred to in point (c) of Article 92(1) of Regulation (EU) No 575/2013 and Article 104a of Directive 2013/36/EU of the resolution entity at the consolidated resolution group level; and
  • (ii) a recapitalisation amount that allows the resolution group resulting from resolution to restore compliance with its total capital ratio requirement referred to in point (c) of Article 92(1) of Regulation (EU) No 575/2013 and its requirement referred to in Article 104a of Directive 2013/36/EU at the consolidated resolution group level after the implementation of the preferred resolution strategy; and
  • (b) for the purpose of calculating the requirement referred to in Article 12a(1), in accordance with point (b) of Article 12a(2), the sum of:
  • (i) the amount of the losses to be absorbed in resolution that corresponds to the resolution entity's leverage ratio requirement referred to in point (d) of Article 92(1) of Regulation (EU) No 575/2013 at the consolidated resolution group level; and
  • (ii) a recapitalisation amount that allows the resolution group resulting from resolution to restore compliance with the leverage ratio requirement referred to in point (d) of Article 92(1) of Regulation (EU) No 575/2013 at the consolidated resolution group level after the implementation of the preferred resolution strategy.

For the purposes of point (a) of Article 12a(2), the requirement referred to in Article 12a(1) shall be expressed in percentage terms as the amount calculated in accordance with point (a) of the first subparagraph of this paragraph, divided by the total risk exposure amount.

For the purposes of point (b) of Article 12a(2), the requirement referred to in Article 12a(1) shall be expressed in percentage terms as the amount calculated in accordance with point (b) of the first subparagraph of this paragraph, divided by the total exposure measure.

When setting the individual requirement provided in point (b) of the first subparagraph of this paragraph, the Board shall take into account the requirements referred to in Article 27(7).

When setting the recapitalisation amounts referred to in the previous subparagraphs, the Board shall:

  • (a) use the most recently reported values for the relevant total risk exposure amount or total exposure measure, adjusted for any changes resulting from resolution actions set out in the resolution plan; and
  • (b) after consulting the competent authorities, including the ECB, adjust the amount corresponding to the current requirement referred to in Article 104a of Directive 2013/36/EU downwards or upwards to determine the requirement that is to apply to the resolution entity after the implementation of the preferred resolution strategy.

The Board shall be able to increase the requirement provided in point (a)(ii) of the first subparagraph by an appropriate amount necessary to ensure that, following resolution, the entity is able to sustain sufficient market confidence for an appropriate period, which shall not exceed one year.

Where the sixth subparagraph of this paragraph applies, the amount referred to in that subparagraph shall be equal to the combined buffer requirement that is to apply after the application of the resolution tools, less the amount referred to in point (a) of point (6) of Article 128 of Directive 2013/36/EU.

The amount referred to in the sixth subparagraph of this paragraph shall be adjusted downwards if, after consulting the competent authorities, including the ECB, the Board determines that it would be feasible and credible for a lower amount to be sufficient to sustain market confidence and to ensure both the continued provision of critical economic functions by the institution or entity referred to in Article 12(1) and its access to funding without recourse to extraordinary public financial support other than contributions from the Fund, in accordance with Article 27(7) and Article 76(3), after implementation of the resolution strategy. That amount shall be adjusted upwards if, after consulting the competent authorities, including the ECB, the Board determines that a higher amount is necessary to sustain sufficient market confidence and to ensure both the continued provision of critical economic functions by the institution or entity referred to in Article 12(1) and its access to funding without recourse to extraordinary public financial support other than contributions from the Fund, in accordance with Article 27(7) and Article 76(3), for an appropriate period which shall not exceed one year.

4.

For resolution entities that are not subject to Article 92a of Regulation (EU) No 575/2013 and that are part of a resolution group the total assets of which exceed EUR 100 billion, the level of the requirement referred to in paragraph 3 of this Article shall be at least equal to:

  • (a) 13,5 % when calculated in accordance with point (a) of Article 12a(2); and
  • (b) 5 % when calculated in accordance with point (b) of Article 12a(2).

By way of derogation from Article 12c, the resolution entities referred to in the first subparagraph of this paragraph shall meet a level of the requirement referred to in the first subparagraph of this paragraph that is equal to 13,5 % when calculated in accordance with point (a) of Article 12a(2) and to 5 % when calculated in accordance with point (b) of Article 12a(2) using own funds, subordinated eligible instruments, or liabilities as referred to in Article 12c(3) of this Regulation.

5.

At the request of the national resolution authority of a resolution entity, the Board shall apply the requirements laid down in paragraph 4 of this Article to a resolution entity which is not subject to Article 92a of Regulation (EU) No 575/2013 and which is part of a resolution group the total assets of which are lower than EUR 100 billion and which the national resolution authority has assessed as reasonably likely to pose a systemic risk in the event of its failure.

When taking a decision to make a request as referred to in the first subparagraph of this paragraph, the national resolution authority shall take into account:

  • (a) the prevalence of deposits, and the absence of debt instruments, in the funding model;
  • (b) the extent to which access to the capital markets for eligible liabilities is limited;
  • (c) the extent to which the resolution entity relies on Common Equity Tier 1 capital to meet the requirement referred to in Article 12f.

The absence of a request by the national resolution authority pursuant to the first subparagraph of this paragraph is without prejudice to any decision of the Board under Article 12c(5).

6.

For entities that are not themselves resolution entities, the amount referred to in the first subparagraph of paragraph 2 shall be the following:

  • (a) for the purpose of calculating the requirement referred to in Article 12a(1), in accordance with point (a) of Article 12a(2), the sum of:
  • (i) the amount of the losses to be absorbed that corresponds to the requirements referred to in point (c) of Article 92(1) of Regulation (EU) No 575/2013 and Article 104a of Directive 2013/36/EU of the entity; and
  • (ii) a recapitalisation amount that allows the entity to restore compliance with its total capital ratio requirement referred in point (c) of Article 92(1) of Regulation (EU) No 575/2013 and its requirement referred to in Article 104a of Directive 2013/36/EU after the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with Article 21 of this Regulation or after the resolution of the resolution group; and
  • (b) for the purpose of calculating the requirement referred to in Article 12a(1), in accordance with point (b) of Article 12a(2), the sum of:
  • (i) the amount of the losses to be absorbed that corresponds to the entity's leverage ratio requirement referred to in point (d) of Article 92(1) of Regulation (EU) No 575/2013; and
  • (ii) a recapitalisation amount that allows the entity to restore compliance with its leverage ratio requirement referred to in point (d) of Article 92(1) of Regulation (EU) No 575/2013 after the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with Article 21 of this Regulation or after the resolution of the resolution group.

For the purposes of point (a) of Article 12a(2), the requirement referred to in Article 12a(1) shall be expressed in percentage terms as the amount calculated in accordance with point (a) of the first subparagraph of this paragraph, divided by the total risk exposure amount.

For the purposes of point (b) of Article 12a(2), the requirement referred to in Article 12a(1) shall be expressed in percentage terms as the amount calculated in accordance with point (b) of the first subparagraph of this paragraph, divided by the total exposure measure.

When setting the individual requirement provided in point (b) of the first subparagraph of this paragraph, the Board shall take into account the requirements referred to in Article 27(7).

When setting the recapitalisation amounts referred to in the previous subparagraphs, the Board shall:

  • (a) use the most recently reported values for the relevant total risk exposure amount or total exposure measure, adjusted for any changes resulting from actions set out in the resolution plan; and
  • (b) after consulting the competent authorities including the ECB, adjust the amount corresponding to the current requirement referred to in Article 104a of Directive 2013/36/EU downwards or upwards to determine the requirement that is to apply to the relevant entity after the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with Article 21 of this Regulation or after the resolution of the resolution group.

The Board shall be able to increase the requirement provided in point (a)(ii) of the first subparagraph of this paragraph by an appropriate amount necessary to ensure that, following the exercise of the power to write down or convert relevant capital instruments and eligible liabilities in accordance with Article 21, the entity is able to sustain sufficient market confidence for an appropriate period which shall not exceed one year.

Where the sixth subparagraph of this paragraph applies, the amount referred to in that subparagraph shall be equal to the combined buffer requirement that is to apply after the exercise of the power referred to in Article 21 of this Regulation or after the resolution of the resolution group, less the amount referred to in point (a) of point (6) of Article 128 of Directive 2013/36/EU.

The amount referred to in the sixth subparagraph of this paragraph shall be adjusted downwards if, after consulting the competent authorities, including the ECB, the Board determines that it would be feasible and credible for a lower amount to be sufficient to ensure market confidence and to ensure both the continued provision of critical economic functions by the institution or entity referred to in Article 12(1) and its access to funding without recourse to extraordinary public financial support other than contributions from the Fund, in accordance with Article 27(7) and Article 76(3), after the exercise of the power referred to in Article 21 or after the resolution of the resolution group. That amount shall be adjusted upwards if, after consulting the competent authorities including the ECB, the Board determines that a higher amount is necessary to sustain sufficient market confidence and to ensure both the continued provision of critical economic functions by the institution or entity referred to in Article 12(1) and its access to funding without recourse to extraordinary public financial support other than contributions from the Fund, in accordance with Article 27(7) and Article 76(3) for an appropriate period which shall not exceed one year.

7.

Where the Board expects that certain classes of eligible liabilities are reasonably likely to be fully or partially excluded from bail-in pursuant to Article 27(5) or might be transferred in full to a recipient under a partial transfer, the requirement referred to in Article 12a(1) shall be met using own funds or other eligible liabilities that are sufficient to:

  • (a) cover the amount of excluded liabilities identified in accordance with Article 27(5);
  • (b) ensure that the conditions referred to in paragraph 2 are fulfilled.
8.

Any decision by the Board to impose a minimum requirement of own funds and eligible liabilities under this Article shall contain the reasons for that decision, including a full assessment of the elements referred to in paragraphs 2 to 7 of this Article, and shall be reviewed by the Board without undue delay to reflect any changes in the level of the requirement referred to in Article 104a of Directive 2013/36/EU.

9.

For the purposes of paragraphs 3 and 6 of this Article, capital requirements shall be interpreted in accordance with the competent authority's application of the transitional provisions laid down in Chapters 1, 2 and 4 of Title I of Part Ten of Regulation (EU) No 575/2013 and in the provisions of national legislation exercising the options granted to the competent authorities by that Regulation.

Article 12e
Determination of the minimum requirement for own funds and eligible liabilities for resolution entities of G-SIIs and Union material subsidiaries of non-EU G-SIIs
1.

The requirement referred to in Article 12a(1) for a resolution entity that is a G-SII or part of a G-SII shall consist of the following:

  • (a) the requirements referred to in Articles 92a and 494 of Regulation (EU) No 575/2013; and
  • (b) any additional requirement for own funds and eligible liabilities that has been determined by the Board specifically in relation to that entity in accordance with paragraph 3 of this Article.
2.

The requirement referred to in Article 12a(1) for a Union material subsidiary of a non-EU G-SII shall consist of the following:

  • (a) the requirements referred to in Articles 92b and 494 of Regulation (EU) No 575/2013; and
  • (b) any additional requirement for own funds and eligible liabilities that has been determined by the Board specifically in relation to that material subsidiary in accordance with paragraph 3 of this Article which is to be met using own funds and liabilities that meet the conditions of Article 12g and Article 92b(2) of Regulation (EU) No 575/2013.
3.

The Board shall impose an additional requirement for own funds and eligible liabilities referred to in point (b) of paragraph 1 and point (b) of paragraph 2 only:

  • (a) where the requirement referred to in point (a) of paragraph 1 or point (a) of paragraph 2 of this Article is not sufficient to fulfil the conditions set out in Article 12d; and
  • (b) to an extent that ensures that the conditions set out in Article 12d are fulfilled.
4.

Any decision by the Board to impose an additional requirement for own funds and eligible liabilities under point (b) of paragraph 1 of this Article or point (b) of paragraph 2 of this Article shall contain the reasons for that decision, including a full assessment of the elements referred to in paragraph 3 of this Article, and shall be reviewed by the Board without undue delay to reflect any changes in the level of the requirement referred to in Article 104a of Directive 2013/36/EU that applies to the resolution group or the Union material subsidiary of a non-EU G-SII.

Article 12f
Application of the minimum requirement for own funds and eligible liabilities to resolution entities
1.

Resolution entities shall comply with the requirements laid down in Articles 12c to 12e on a consolidated basis at the level of the resolution group.

2.

The Board, after consulting the group-level resolution authority, if that authority is not the Board, and the consolidating supervisor shall determine the requirement referred to in Article 12a(1) for a resolution entity established in a participating Member State at the consolidated resolution group level on the basis of the requirements laid down in Articles 12c to 12e and on the basis of whether the third-country subsidiaries of the group are to be resolved separately under the resolution plan.

3.

For resolution groups identified in accordance with point (b) of point (24b) of Article 3(1), the Board shall decide, depending on the features of the solidarity mechanism and of the preferred resolution strategy, which entities in the resolution group are to be required to comply with Article 12d(3) and (4) and Article 12e(1), in order to ensure that the resolution group as a whole complies with paragraphs 1 and 2 of this Article, and how such entities are to do so in conformity with the resolution plan.

Article 12g
Application of the minimum requirement for own funds and eligible liabilities to entities that are not themselves resolution entities
1.

Institutions that are subsidiaries of a resolution entity or of a third-country entity, but are not themselves resolution entities, shall comply with the requirements laid down in Article 12d on an individual basis.

The Board, after having consulted the competent authorities, including the ECB, may decide to apply the requirement laid down in this Article to an entity as referred to in Article 2, point (b), or to a financial institution as referred to in Article 2, point (c), that is a subsidiary of a resolution entity but is not itself a resolution entity.

By way of derogation from the first subparagraph of this paragraph, Union parent undertakings that are not themselves resolution entities, but are subsidiaries of third-country entities, shall comply with the requirements laid down in Articles 12d and 12e on a consolidated basis.

By way of derogation from the first and second subparagraphs, the Board may decide to determine the requirement laid down in Article 12d on a consolidated basis for a subsidiary as referred to in this paragraph where the Board concludes that all of the following conditions are met:

  • (a) the subsidiary meets one of the following conditions:
  • (i) the subsidiary is held directly by the resolution entity and:
  • — the resolution entity is a Union parent financial holding company or a Union parent mixed financial holding company;
  • — both the subsidiary and the resolution entity are established in the same participating Member State and are part of the same resolution group;
  • — the resolution entity does not hold directly any subsidiary institution, as referred to in Article 1(1), point (a), of Directive 2014/59/EU, or any subsidiary entity, as referred to in Article 1(1), point (b), (c) or (d), of that Directive, where that entity is subject to the requirement referred to in Article 45c or 45f of that Directive or in Article 12d or 12g of this Regulation, other than the subsidiary concerned;
  • — the subsidiary would be disproportionately affected by the deductions required pursuant to Article 72e(5) of Regulation (EU) No 575/2013;
  • (ii) the subsidiary is subject to the requirement referred to in Article 104a of Directive 2013/36/EU on a consolidated basis only and the determination of the requirement laid down in Article 12d of this Regulation on a consolidated basis would not lead to overstating the recapitalisation needs, for the purposes of Article 12d(1), point (b), of this Regulation, of the subgroup consisting of entities within the consolidation perimeter concerned, in particular where there is a prevalence of liquidation entities within the same consolidation perimeter;
  • (b) compliance with the requirement laid down in Article 12d on a consolidated basis as a substitute for compliance with that requirement on an individual basis does not impair in a material way any of the following:
  • (i) the credibility and feasibility of the group resolution strategy;
  • (ii) the subsidiary’s capacity to comply with its own funds requirement after the exercise of write-down and conversion powers; and
  • (iii) the adequacy of the internal loss transfer and recapitalisation mechanism, including the write down or conversion, in accordance with Article 21, of relevant capital instruments and eligible liabilities of the subsidiary concerned or of other entities in the resolution group.

For resolution groups identified in accordance with point (b) of point (24b) of Article 3(1), those credit institutions which are permanently affiliated to a central body, but are not themselves resolution entities, a central body which is not itself a resolution entity, and any resolution entities that are not subject to a requirement under Article 12f(3), shall comply with Article 12d(6) on an individual basis.

The requirement referred to in Article 12a(1) for an entity referred to in this paragraph shall be determined on the basis of the requirements laid down in Article 12d.

2.

The requirement referred to in Article 12a(1) for entities referred to in paragraph 1 of this Article shall be met using one or more of the following:

  • (a) liabilities:
  • (i) that are issued to and bought by the resolution entity, either directly or indirectly through other entities in the same resolution group that bought the liabilities from the entity that is subject to this Article, or are issued to and bought by an existing shareholder that is not part of the same resolution group as long as the exercise of write-down or conversion powers in accordance with Article 21 does not affect the control of the subsidiary by the resolution entity;
  • (ii) that fulfil the eligibility criteria referred to in Article 72a of Regulation (EU) No 575/2013, except for points (b), (c), (k), (l) and (m) of Article 72b(2) and Article 72b(3) to (5) of that Regulation;
  • (iii) that rank, in normal insolvency proceedings, below liabilities that do not meet the condition referred to in point (i) and that are not eligible for own funds requirements;
  • (iv) that are subject to write-down or conversion powers in accordance with Article 21 in a manner that is consistent with the resolution strategy of the resolution group, in particular by not affecting the control of the subsidiary by the resolution entity;
  • (v) the acquisition of ownership of which is not funded directly or indirectly by the entity that is subject to this Article;
  • (vi) the provisions governing which do not indicate explicitly or implicitly that the liabilities would be called, redeemed, repaid or repurchased early, as applicable, by the entity that is subject to this Article, other than in the case of the insolvency or liquidation of that entity, and that entity does not otherwise provide such an indication;
  • (vii) the provisions governing which do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the entity that is subject to this Article;
  • (viii) the level of interest or dividend payments, as applicable, due thereon is not amended on the basis of the credit standing of the entity that is subject to this Article or its parent undertaking;
  • (b) own funds, as follows:
  • (i) Common Equity Tier 1 capital, and
  • (ii) other own funds that:
  • — are issued to and bought by entities that are included in the same resolution group, or
  • — are issued to and bought by entities that are not included in the same resolution group as long as the exercise of write-down or conversion powers in accordance with Article 21 does not affect the control of the subsidiary by the resolution entity.

2a. Where an entity as referred to in paragraph 1 complies with the requirement referred to in Article 12a(1) on a consolidated basis, the amount of own funds and eligible liabilities of that entity shall include the following liabilities issued in accordance with paragraph 2, point (a), of this Article by a subsidiary established in the Union included in the consolidation of that entity:

  • (a) liabilities issued to and bought by the resolution entity, either directly, or indirectly through other entities in the same resolution group that are not included in the consolidation of the entity complying with the requirement referred to in Article 12a(1) on a consolidated basis;
  • (b) liabilities issued to an existing shareholder that is not part of the same resolution group.

2b. The liabilities referred to in paragraph 2a, points (a) and (b), of this Article, shall not exceed the amount determined by subtracting from the amount of the requirement referred to in Article 12(1) applicable to the subsidiary included in the consolidation the sum of all of the following:

  • (a) the liabilities issued to and bought by the entity complying with the requirement referred to in Article 12a(1) on a consolidated basis either directly, or indirectly through other entities in the same resolution group that are included in the consolidation of that entity;
  • (b) the amount of own funds that are issued in accordance with paragraph 2, point (b), of this Article.
3.

The Board may permit the requirement referred to in Article 12a(1) to be met in full or in part with a guarantee provided by the resolution entity which fulfils the following conditions:

  • (a) both the subsidiary and the resolution entity are established in the same participating Member State and are part of the same resolution group;
  • (b) the resolution entity complies with the requirement referred to in Article 12f;
  • (c) the guarantee is provided for at least an amount that is equivalent to the amount of the requirement for which it substitutes;
  • (d) the guarantee is triggered when the subsidiary is unable to pay its debts or other liabilities as they fall due, or a determination has been made in accordance with Article 21(3) in respect of the subsidiary, whichever is the earliest;
  • (e) the guarantee is collateralised through a financial collateral arrangement as defined in point (a) of Article 2(1) of Directive 2002/47/EC of the European Parliament and of the Council ([^E0007]) for at least 50 % of its amount;
  • (f) the collateral backing the guarantee fulfils the requirements of Article 197 of Regulation (EU) No 575/2013, which, following appropriately conservative haircuts, is sufficient to cover the amount collateralised as referred to in point (e);
  • (g) the collateral backing the guarantee is unencumbered and, in particular, is not used as collateral to back any other guarantee;
  • (h) the collateral has an effective maturity that fulfils the same maturity condition as that referred to in Article 72c(1) of Regulation (EU) No 575/2013; and
  • (i) there are no legal, regulatory or operational barriers to the transfer of the collateral from the resolution entity to the relevant subsidiary, including where resolution action is taken in respect of the resolution entity. For the purposes of point (i) of the first subparagraph, at the request of the Board, the resolution entity shall provide an independent written and reasoned legal opinion or shall otherwise satisfactorily demonstrate that there are no legal, regulatory or operational barriers to the transfer of collateral from the resolution entity to the relevant subsidiary.
4.

Where in accordance with the global resolution strategy subsidiaries established in the Union, or a Union parent undertaking and its subsidiary institutions, are not resolution entities and the members of the European resolution college, where established pursuant to Article 89 of Directive 2014/59/EU, agree with that strategy, subsidiaries established in the Union or, on a consolidated basis, the Union parent undertaking shall comply with the requirement of Article 12a(1) of this Regulation by issuing the instruments referred to in paragraph 2, points (a) and (b), of this Article, to any of the following:

  • (a) their ultimate parent undertaking established in a third country;
  • (b) the subsidiaries of that ultimate parent undertaking that are established in the same third country;
  • (c) other entities under the conditions set out in paragraph 2, points (a)(i) and (b)(ii), of this Article.
Article 12h
Waiver of the minimum requirement for own funds and eligible liabilities applied to entities that are not themselves resolution entities
1.

The Board may waive the application of Article 12g in respect of a subsidiary of a resolution entity established in a participating Member State where:

  • (a) both the subsidiary and the resolution entity are established in the same participating Member State and are part of the same resolution group;
  • (b) the resolution entity complies with the requirement referred to in Article 12f;
  • (c) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by the resolution entity to the subsidiary in respect of which a determination has been made in accordance with Article 21(3), in particular where resolution action is taken in respect of the resolution entity.
2.

The Board may waive the application of Article 12g in respect of a subsidiary of a resolution entity established in a participating Member State where:

  • (a) both the subsidiary and its parent undertaking are established in the same participating Member State and are part of the same resolution group;
  • (b) the parent undertaking complies on a consolidated basis with the requirement referred to in Article 12a(1) in that participating Member State;
  • (c) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by the parent undertaking to the subsidiary in respect of which a determination has been made in accordance with Article 21(3), in particular where resolution action is taken in respect of the parent undertaking.
Article 12i
Waiver for a central body and credit institutions permanently affiliated to a central body

The Board may partially or fully waive the application of Article 12g in respect of a central body or of a credit institution which is permanently affiliated to a central body, where all of the following conditions are met:

  • (a) the credit institution and the central body are subject to supervision by the same competent authority, are established in the same participating Member State and are part of the same resolution group;
  • (b) the commitments of the central body and its permanently affiliated credit institutions are joint and several liabilities, or the commitments of its permanently affiliated credit institutions are entirely guaranteed by the central body;
  • (c) the minimum requirement for own funds and eligible liabilities, and the solvency and liquidity of the central body and of all of the permanently affiliated credit institutions, are monitored as a whole on the basis of the consolidated accounts of those institutions;
  • (d) in the case of a waiver for a credit institution which is permanently affiliated to a central body, the management of the central body is empowered to issue instructions to the management of the permanently affiliated institutions;
  • (e) the relevant resolution group complies with the requirement referred to in Article 12f(3); and,
  • (f) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities between the central body and the permanently affiliated credit institutions in the event of resolution.
Article 12j
Breaches of the minimum requirement for own funds and eligible liabilities
1.

Any breach of the minimum requirement for own funds and eligible liabilities referred to in Article 12f or Article 12g shall be addressed on the basis of at least one of the following:

  • (a) powers to address or remove impediments to resolvability in accordance with Article 10;
  • (b) powers referred to in Article 10a;
  • (c) measures referred to in Article 104 of Directive 2013/36/EU;
  • (d) early intervention measures in accordance with Article 13;
  • (e) administrative penalties and other administrative measures in accordance with Articles 110 and 111 of Directive 2014/59/EU.

Furthermore, the Board or the ECB may carry out an assessment of whether the institution is failing or is likely to fail, in accordance with Article 18.

2.

The Board, resolution authorities and competent authorities of participating Member States shall consult each other when they exercise their respective powers referred to in paragraph 1.

Article 12k
Transitional and post-resolution arrangements
1.

By way of derogation from Article 12a(1), the Board and national resolution authorities shall determine appropriate transitional periods for entities referred to in Article 12(1) and (3) to comply with the requirements in Articles 12f or 12g, or with the requirements that result from the application of Article 12c(4), (5) or (7), as appropriate. The deadline for entities to comply with the requirements in Articles 12f or 12g or the requirements that result from the application of Article 12c(4), (5) or (7) shall be 1 January 2024.

The Board shall determine intermediate target levels for the requirements in Articles 12f or 12g or for requirements that result from the application of Article 12c(4), (5) or (7), as appropriate, that entities referred to in Article 12(1) and (3) shall comply with at 1 January 2022. The intermediate target levels, as a rule, shall ensure a linear build-up of own funds and eligible liabilities towards the requirement.

The Board may set a transitional period that ends after 1 January 2024 where duly justified and appropriate on the basis of the criteria referred to in paragraph 7, taking into consideration:

  • (a) the development of the entity's financial situation;
  • (b) the prospect that the entity will be able to ensure compliance in a reasonable timeframe with the requirements in Articles 12f or 12g or with a requirement that results from the application of Article 12c(4), (5) or (7); and
  • (c) whether the entity is able to replace liabilities that no longer meet the eligibility or maturity criteria laid down in Articles 72b and 72c of Regulation (EU) No 575/2013, and Article 12c or Article 12g(2) of this Regulation, and if not, whether that inability is of an idiosyncratic nature or is due to market-wide disturbance.
2.

The deadline for resolution entities to comply with the minimum level of the requirements referred to in Article 12d(4) or (5) shall be 1 January 2022.

3.

The minimum levels of the requirements referred to in Article 12d(4) and (5) shall not apply within the two-year period following the date:

  • (a) on which the Board has applied the bail-in tool; or
  • (b) on which the resolution entity has put in place an alternative private sector measure as referred to in point (b) of Article 18(1) by which capital instruments and other liabilities have been written down or converted into Common Equity Tier 1 instruments, or on which write down or conversion powers, in accordance with Article 21, have been exercised in respect of that resolution entity, in order to recapitalise the resolution entity without the application of resolution tools.
4.

The requirements referred to in Article 12c(4) and (7) as well as Article 12d(4) and (5), as applicable, shall not apply within the three-year period following the date on which the resolution entity or the group of which the resolution entity is part has been identified as a G-SII, or the resolution entity starts to be in the situation referred to in Article 12d(4) or (5).

5.

By way of derogation from Article 12a(1), the Board shall determine an appropriate transitional period within which to comply with the requirements of Article 12f or 12g, or a requirement resulting from the application of Article 12c(4), (5) or (7), as appropriate, for entities to which resolution tools or the write-down or conversion power referred to in Article 21 have been applied.

6.

For the purposes of paragraphs 1 to 5 of this Article, the Board shall communicate to the entity a planned minimum requirement for own funds and eligible liabilities for each 12-month period during the transitional period, with a view to facilitating a gradual build-up of its loss-absorption and recapitalisation capacity. At the end of the transitional period, the minimum requirement for own funds and eligible liabilities shall be equal to the amount determined under Article 12c(4), (5) or (7), Article 12d(4) or (5), Article 12f or Article 12g, as applicable.

7.

When determining the transitional periods, the Board shall take into account:

  • (a) the prevalence of deposits and the absence of debt instruments in the funding model;
  • (b) the access to the capital markets for eligible liabilities;
  • (c) the extent to which the resolution entity relies on Common Equity Tier 1 capital to meet the requirement referred to in Article 12f.
8.

Subject to paragraph 1, the Board shall not be prevented from subsequently revising either the transitional period or any planned minimum requirement for own funds and eligible liabilities communicated under paragraph 6.

CHAPTER 2 Early intervention

Article 13
Early intervention
1.

The ECB or national competent authorities shall inform the Board of any measure that they require an institution or group to take or that they take themselves pursuant to Article 16 of Regulation (EU) No 1024/2013, to Article 27(1) or Article 28 or 29 of Directive 2014/59/EU, or to Article 104 of Directive 2013/36/EU.

The Board shall notify the Commission of any information which it has received pursuant to the first subparagraph.

2.

From the date of receipt of the information referred to in paragraph 1, and without prejudice to the powers of the ECB and national competent authorities in accordance with other Union law, the Board may prepare for the resolution of the institution or group concerned.

For the purposes of the first subparagraph, the ECB or the relevant national competent authority shall closely monitor, in cooperation with the Board, the conditions of the institution or the parent undertaking and their compliance with any early intervention measure that was required of them.

The ECB or the relevant national competent authority shall provide the Board with all of the information necessary in order to update the resolution plan and prepare for the possible resolution of the institution and for valuation of the assets and liabilities of the institution in accordance with Article 20(1) to (15).

3.

The Board shall have the power to require the institution, or the parent undertaking, to contact potential purchasers in order to prepare for the resolution of the institution, subject to the criteria specified in Article 39(2) of Directive 2014/59/EU and the requirements of professional secrecy laid down in Article 88 of this Regulation.

The Board shall also have the power to require the relevant national resolution authority to draft a preliminary resolution scheme for the institution or group concerned.

The Board shall inform the ECB, the relevant national competent authorities and the relevant national resolution authorities of any action it takes pursuant to this paragraph.

4.

If the ECB or the national competent authorities intend to impose on an institution or a group any additional measure under Article 16 of Regulation (EU) No 1024/2013, under Article 27(1), 28 or 29 of Directive 2014/59/EU or under Article 104 of Directive 2013/36/EU, before the entity or group has fully complied with the first measure notified to the Board, they shall inform the Board before imposing such additional measure on the institution or group concerned.

5.

The ECB or the national competent authority, the Board and the relevant national resolution authorities shall ensure that the additional measure referred to in paragraph 4 and any action of the Board aimed at preparing for resolution under paragraph 2 are consistent.

CHAPTER 3 Resolution

Article 14
Resolution objectives
1.

When acting under the resolution procedure referred to in Article 18, the Board, the Council, the Commission, and, where relevant, the national resolution authorities, in respect of their respective responsibilities, shall take into account the resolution objectives, and choose the resolution tools and resolution powers which, in their view, best achieve the resolution objectives that are relevant in the circumstances of the case.

2.

The resolution objectives referred to in paragraph 1 are the following:

  • (a) to ensure the continuity of critical functions;
  • (b) to avoid significant adverse effects on financial stability, in particular by preventing contagion, including to market infrastructures, and by maintaining market discipline;
  • (c) to protect public funds by minimising reliance on extraordinary public financial support;
  • (d) to protect depositors covered by Directive 2014/49/EU and investors covered by Directive 97/9/EC;
  • (e) to protect client funds and client assets.

When pursuing the objectives referred to in the first subparagraph, the Board, the Council, the Commission and, where relevant, the national resolution authorities, shall seek to minimise the cost of resolution and avoid destruction of value unless necessary to achieve the resolution objectives.

3.

Subject to different provisions of this Regulation, the resolution objectives are of equal significance, and shall be balanced, as appropriate, to the nature and circumstances of each case.

Article 15
General principles governing resolution
1.

When acting under the resolution procedure referred to in Article 18, the Board, the Council, the Commission and, where relevant, the national resolution authorities, shall take all appropriate measures to ensure that the resolution action is taken in accordance with the following principles:

  • (a) the shareholders of the institution under resolution bear first losses;
  • (b) creditors of the institution under resolution bear losses after the shareholders in accordance with the order of priority of their claims pursuant to Article 17, save as expressly provided otherwise in this Regulation;
  • (c) the management body and senior management of the institution under resolution are replaced, except in those cases where the retention of the management body and senior management, in whole or in part, as appropriate to the circumstances, is considered to be necessary for the achievement of the resolution objectives;
  • (d) the management body and senior management of the institution under resolution shall provide all necessary assistance for the achievement of the resolution objectives;
  • (e) natural and legal persons are made liable, subject to national law, under civil or criminal law, for their responsibility for the failure of the institution under resolution;
  • (f) except where otherwise provided in this Regulation, creditors of the same class are treated in an equitable manner;
  • (g) no creditor shall incur greater losses than would have been incurred if an entity referred to in Article 2 had been wound up under normal insolvency proceedings in accordance with the safeguards provided for in Article 29;
  • (h) covered deposits are fully protected; and
  • (i) resolution action is taken in accordance with the safeguards in this Regulation.
2.

Where an institution is a group entity, without prejudice to Article 14, the Board, the Council and the Commission, when deciding on the application of resolution tools and the exercise of resolution powers, shall act in a way that minimises the impact on other group entities and on the group as a whole and minimises the adverse effect on financial stability in the Union and its Member States, in particular in the countries where the group operates.

3.

Where the sale of business tool, the bridge institution tool or the asset separation tool is applied to an entity referred to in Article 2 of this Regulation, that entity shall be considered to be the subject of bankruptcy proceedings or analogous insolvency proceedings for the purposes of Article 5(1) of Council Directive 2001/23/EC ([^E0008]).

4.

When deciding on the application of resolution tools and the exercise of resolution powers, the Board shall instruct national resolution authorities to inform and consult employee representatives where appropriate.

This is without prejudice to provisions on the representation of employees in management bodies as provided for by national law or practice.

Article 16
Resolution of financial institutions and parent undertakings
1.

The Board shall decide on a resolution action in relation to a financial institution established in a participating Member State, where the conditions laid down in Article 18(1) are met with regard to both the financial institution and with regard to the parent undertaking subject to consolidating supervision.

2.

The Board shall take a resolution action in relation to a parent undertaking referred to in point (b) of Article 2 where the conditions laid down in Article 18(1) are met.

3.

Notwithstanding the fact that a parent undertaking does not meet the conditions established in Article 18(1), the Board may decide on a resolution action with regard to that parent undertaking where it is a resolution entity and where one or more of its subsidiaries which are institutions but are not resolution entities themselves meet the conditions set out in Article 18(1), provided that their assets and liabilities are such that their failure threatens an institution or the group as a whole, and resolution action with regard to that parent undertaking is necessary either for the resolution of those subsidiaries which are institutions or for the resolution of the relevant resolution group as a whole.

Article 17
Order of priority of claims
1.

When applying the bail-in tool to an entity referred to in Article 2 of this Regulation, and without prejudice to liabilities excluded from the bail-in tool under Article 27(3) of this Regulation, the Board, the Commission, or, where applicable, the national resolution authorities, shall decide on the exercise of the write-down and conversion powers, including on any possible application of Article 27(5) of this Regulation, and the national resolution authorities shall exercise those powers in accordance with Articles 47 and 48 of Directive 2014/59/EU and in accordance with the reverse order of priority of claims laid down in their national law, including the provisions transposing Article 108 of that Directive.

2.

Participating Member States shall notify to the Commission and to the Board the ranking of claims against entities referred to in Article 2 in national insolvency proceedings on 1 July of every year or immediately, where there is a change of the ranking.

Where the bail-in tool is applied, the relevant deposit guarantee scheme shall be liable in the terms provided for in Article 79.

Article 18
Resolution procedure
1.

The Board shall adopt a resolution scheme pursuant to paragraph 6 in relation to entities and groups referred to in Article 7(2), and to the entities and groups referred to in Article 7(4)(b) and (5) where the conditions for the application of those paragraphs are met, only when it assesses, in its executive session, on receiving a communication pursuant to the fourth subparagraph, or on its own initiative, that the following conditions are met:

  • (a) the entity is failing or is likely to fail;

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